Proxy Blog

Costco Wholesale Corporation 

January 6, 2020

The annual proxy for this chain of members-only warehouse stores had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Board proposal to permit removal of directors without cause 
  3. Shareholder proposal on director skills matrix and disclosure of director ideological perspectives 

Magni voted as follows: 

  1. For and against proforma proposals.
    -Against directors  Directors do not stand for annual election. This staggered board structure is especially problematic given the preferred equity classes. The combination provides shareholders little ability to influence the company
    -For auditors – There appear to be no controversies with the financial statements of the company.
    -Against say-on-pay” – The proxy materials did not disclose any shareholder engagement efforts. While the peer group was listed, the criteria for the peer group were not disclosed and there was no comparison of Costco to the peer group. 
  2. For the board proposal. In a company with an independent board, the board should have the authority to remove a director without cause. 
  3. Against shareholder proposal on director skills matrix and disclosure of director ideological perspectivesThe shareholder submitting the proposal casts it as about diversity. There is a requirement for additional disclosure. Most of the proposal is about good things (e.g., seeking a diversity of view, criteria for directors, matrix of directors and their fit with the criteria). However, the proposal also insists on political perspective as one of the criteria. That part of the proposal is problematic. The board should have the latitude to select the criteria most useful in an effective board. The shareholders can then decide whether the criteria are good or not. For many companies, political considerations are not in the interests of the company. By forcing such information to be disclosed when the board does not consider the criteria relevant, it would create the risk that the company will be part of our current divisive political climate. This risk has negative consequences for company valuation.